Prices end a bit lower on week as China-demand worry stays in backdrop

SAN FRANCISCO (MarketWatch) -- Crude-oil futures closed more than 2% higher Friday with traders concerned about the chance of disruptions to Nigerian oil production as the country readied for the presidential election this weekend against a backdrop of violence and unrest.

But prices ended the week with a loss, following a 2% drop in the previous session on worries over the potential for weaker energy demand out of China.

"Hanging over the market are the Nigerian elections this weekend," said John Kilduff, an analyst at Fimat USA, in a note to clients. "There is certainly the risk that more politically inspired violence will erupt and threaten the flow of oil."

Crude for May delivery closed up 2.5%, or $1.55, at $63.38 a barrel on the New York Mercantile Exchange. On Thursday, the contract lost $1.30 to close at its lowest level in more than a week. It finished end the week with a 25-cent, or 0.4%, loss.

The expiration of the May contract likely exaggerated the move in crude prices Friday. June crude became the lead-month contract at the session's close. It finished the day up 79 cents at $64.11.

Traders were cautious ahead of the weekend's presidential election in Nigeria, the world's eighth-biggest oil producer, said Edward Meir, analyst at Man Financial, in a research note.

Nigeria's outgoing President Olusegun Obasanjo said last week's state polls were flawed and he called on election officials to prevent vote-rigging, the BBC reported.

"The world is watching us, and we cannot afford to disappoint ourselves, our friends and the world," Obasanjo said in a speech. The election process has been marred by violence. Meanwhile, a group seeking to keep more of the country's oil revenue within Nigeria has carried out a series of attacks on foreign oil workers.

Ballot papers, which are being shipped from South Africa, have not yet arrived in Nigeria, the election commission chief said Friday, the BBC reported.

The Chinese benchmark had tumbled 4.5% in the previous session, as investors cut positions in anticipation that first-quarter gross-domestic-product data that came after market hours would point to an unhealthy reacceleration in the economy, potentially spurring additional austerity measures to cool growth. See Asia Markets.

The data showed the economy grew a faster-than-expected 11.1% in the quarter, bolstering expectations the Chinese authorities will implement fresh cooling measures. The news hit commodities hard on Thursday -- China has been a voracious consumer of commodities as its economy has boomed.

Oil traders Friday also digested news that the European Union and Iran will hold preliminary talks on April 25 to discuss a resumption of formal talks regarding Tehran's nuclear program, according to BBC.

High fuel price sparks more talk

Against this backdrop Friday, other energy futures finished higher. May reformulated gasoline closed at $2.1374 a gallon, up 4.86 cents, and May heating oil added 2.67 cents to end at $1.825 a gallon. Both contracts ended lower for the week.

The retail price for regular gasoline stood at $2.863 Friday, slightly below Thursday's $2.867 but still nearly 12% above the month-ago level, according to AAA's Daily Fuel Gauge Report. See the latest data.

The high price of motor fuel has fueled more talk about alternative energy sources, and diesel's old image as a dirty fuel needs an overhaul, say proponents of renewable diesel. See Commodities Corner.

"This new twist in using animal fats besides vegetation by-product fuel sources [shows] that there are more and more viable alternatives to gasoline -- and that might just put OPEC countries on the defensive if they see that there is a reality and commitment to have a substitute product to replace gasoline in the near future," said John Person, president of National Futures Advisory Service.

"Perhaps they will lean towards increasing oil production soon, to ward off the cost benefits of such actions," he said.

But whatever the energy preference of a consumer may be, availability and variety of motor fuels at the retail level is growing. See full story.

Elsewhere in the energy market Friday, natural-gas futures closed lower despite the bigger-than-expected decline in U.S supplies last week reported by the Energy Department on Thursday. See full story.

Traders expect demand for the commodity as a heating fuel to wane as temperatures throughout the nation start to warm up.

May natural gas fell 11.1 cents, or 1.5%, to close at $7.381 per million British thermal units. The contract was down 5.4% for the week.

"Cool early spring weather, maintenance at the nation's nuclear power plants, and the start of the stock-building season have supported prices recently. Now that these factors have dissipated, there is really nothing to hold up prices until air-conditioning loads and concerns about hurricane damage start to build in a few weeks," said Fimat's Kilduff, in a separate note to clients.

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